Project Pages

Statement 14 Reexamination

Primary Objective: This objective of this project is to reexamine the requirements of Statement No. 14, The Financial Reporting Entity, as amended, to determine the effectiveness of the current standards, including its provisions for reporting fiduciary activities. That is, it would determine whether financial statement users, preparers, and attesters believe that reporting entities applying that standard are including all appropriate related organizations and excluding organizations that should not be included. The reexamination also would raise the question of whether the financial information of the included organizations is displayed and disclosed in the most appropriate and useful manner.

Status: The Board reviewed the ballot draft of The Financial Reporting Entity: Omnibus, an amendment of GASB Statements No. 14 and No. 34 at the December 2010 meeting. The Board approved the release of the Statement.

Background: This project originally had a second objective of developing requirements that could constitute generally accepted accounting principles (GAAP) for separately issued financial statements for reporting units that comprise less than a separate legal entity. That is, it would have addressed all reporting units that are not legally separate entities, as defined in Statement 14. However, at the January 2009 meeting, some Board members expressed their belief that reports that fell within this category generally were special purpose in nature, and that it was not their intent for the GASB to set GAAP for special purpose reporting. The Board decided that the project should not provide guidance for these or other reporting unit financial reports; therefore, the reporting unit presentations part of the project was removed from the current technical agenda.

Statement 14 Reexamination: The GASB’s strategic plan calls for a periodic reexamination of its standards. Because Statement 14 affects so many governments and because the structures and relationships of component units vary so much from government to government, many questions have arisen about Statement 14 that could be addressed during its reexamination.

Paragraph 19 of Statement 14 requires that governments include fiduciary activities (for example, employee benefit plans) as trust funds “if the primary government has a fiduciary responsibility for them,” whether or not the organizations that administer them (for example, public employee retirement systems) would meet the criteria for inclusion if analyzed as potential component units. However, existing standards provide no guidance regarding characteristics that should be considered in deciding whether an employer has fiduciary responsibility, such that the employer should report a particular employee benefit plan in that way.

The staff has received numerous technical inquiries as to whether an employer should report specific pension plans as pension trust funds and is aware that, in the absence of authoritative guidance, preparers and auditors have tended to interpret employer fiduciary responsibility in a variety of ways ranging from very broad or abstract, to more narrow or concrete (for example, focusing on custody of the trust assets).

In March 2008, this project was reviewed by the Governmental Accounting Standards Advisory Council (GASAC). The GASAC members rated this project as a high priority for the current agenda.

Accounting and Financial Reporting Issues: This project will reexamine all the major provisions of the existing standard, as amended, with additional emphasis on areas that have become recurring topics for technical inquiries. For example, the most regularly debated provision of Statement 14 is the criteria for inclusion. Some would argue that more component units should be blended; others would eliminate blending as a method of inclusion. Many have expressed concerns over the broad sweep of financial accountability—that is, they question the usefulness of presenting/aggregating component units that have significantly different relationships with the primary government. For example, a component unit that is included only because the primary government approves its capital budget is presented in exactly the same manner as a component unit with debt and operating deficits backed by the primary government. Should component units with such disparate characteristics be combined for financial statement presentation? Also, should additional guidance be provided for determining when and how to include fiduciary activities?

The project also will address reporting entity issues that have arisen since the issuance of Statement 14, including any that may have come up with the implementation of Statement 34 and subsequent standards. For example:

Should the blending criteria be reexamined in light of concerns that arose in connection with certain tobacco settlement authorities? An exception to the blending criteria has already been introduced into the standards through Statement No. 39, Determining Whether Certain Organizations Are Component Units.

How should blending be accomplished in a single-column business-type activity reporting entity?

Project History: At the January 2006 meeting, the Board decided to combine the Reporting Unit and Statement 14 Reexamination projects and add them to the research agenda. At the January 2009 meeting, the Board decided to remove reporting unit presentations from the scope of the project.

Dr. Craig Shoulders received a GASB research grant to conduct research designed to provide the GASB with the information necessary to assess the current state of Statement 14 reporting by the 50 states and a representative sample of cities and counties. That research was presented to the Board in August 2007. It provides information about the number of component units that are reported by governments, with a breakdown between blended and discretely presented component units. The research identifies the reasons that the components are included in the reporting entity and whether governments display or disclose information about discretely presented component units.

Based on Dr. Shoulders’ research and prior GASB research, the staff conducted an Internet-based survey to further determine user needs regarding component unit reporting. The results of that research were presented at the April 2008 meeting. In addition, the staff conducted structured phone and in-person interviews of all types of financial statement users to further ascertain whether the current accounting guidance for component units is sufficiently meeting user needs.

The results of the user interviews were presented at the September 2008 meeting. At the September and November 2008 meetings, the Board tentatively agreed to generally follow the current Statement 14 framework during the reexamination. Based in part on research conducted by the staff, the Board concluded that the benefits of applying Statement 14 provisions continue to exceed the costs.

At the December 2008 meeting, the Board tentatively decided it should redeliberate the criteria for blending component units. The redeliberation will include, among other things, issues related to (1) blending in the Enterprise Fund/BTA Model, (2) potentially clarifying the “exclusively benefits” criterion, and (3) the appropriateness of blending Tobacco Settlement Authorities.

At the January 2009 meeting, the Board decided that the project would not include guidance for reporting units, such as fund or department financial reports. Therefore, the scope of the project will focus solely on Statement 14 reexamination issues.

At the February teleconference, the Board began a discussion of the “fiscal dependency” criterion outlined in paragraph 21 of Statement 14. The intention of the discussion was to determine if this provision continues to be appropriate and if there are possible modifications that need to be made to it. The Board did not reach any tentative conclusions and requested that the staff further consider the criterion as part of a broader discussion of the definition of financial accountability in paragraph 21 at the April meeting.

At the March teleconference, the Board tentatively reaffirmed the notion that blending of component units is appropriate only when they are in substance the same as the primary government. The Board also tentatively agreed that the specific criteria for blending should be amended to provide more consistent presentations of certain component units. The Board tentatively agreed to examine specific proposed changes, including changes that may affect the presentation of state lotteries, at a future meeting.

At the April 2009 meeting, the Board tentatively decided that, in addition to meeting the fiscal dependency criterion, a financial benefit/burden relationship should be present in order for a potential component unit to be included in the primary government’s financial statements. In addition, the “misleading to exclude” notion would be retained in Statement 14 but amendments to the guidance will be considered to indicate that it is generally permissive to include entities that the primary government believes would be misleading to exclude, rather than a requirement.

At the July 2009 meeting, the Board tentatively decided that criteria for blending will be amended. Component units with substantively the same board also would need to have a financial benefit/burden relationship with the primary government. Debt-issuing component units would qualify for blending if primary government resources are used to retire their debt. Lotteries typically would qualify for blending. Blending in single-column, stand-alone business-type activity reports would be done by combining all information into the primary government column, and combining information would be required in the notes.

At the August 2009 meeting, the Board considered the potential consequences of further limiting blending when the governing bodies of the component unit and primary government are substantively the same. (At the July 2009 meeting, the Board tentatively decided that, in addition to having substantively the same board, a component unit would have to have a financial benefit/burden relationship with the primary government in order to qualify for blending.) The Board decided to expand the previous tentative decision by also requiring blending when management (below the level of the elected officials) of a primary government has operational responsibility for the activities of a component unit. The addition of this new blending criterion will be highlighted as an issue in the Exposure Draft resulting from the project.

The Board also requested that the blending provisions of Statement 14 be amended to clarify that blended component units are subject to the same requirements and constraints as funds of the primary government (except for the general fund).

The Board requested that the Exposure Draft include an issue asking whether the misleading-to-exclude criterion is still needed.

At the October 2009 meeting, the Board concluded its discussions of paragraph 12, which provides that a component unit should be included if its “exclusion would cause the reporting entity’s financial statements to be misleading or incomplete.” The “misleading” notion will be retained, but not the reference to “incomplete.” Additional amendments to the guidance will clarify that the misleading criterion is based upon professional judgment of the preparer.

The Board tentatively decided that acquisitions of 100 percent of the net assets (for example, stock) of a corporation will be reported as blended component units.

At the November 2009 meeting the Board discussed reporting requirements for major component units and tentatively decided to remove the current provision to consider the component unit’s significance relative to the other component units. In addition, new language would require that consideration be given to the nature of significant transactions with the primary government and to significant benefit/burden relationship exists between the component unit and the primary government. In addition, the Board requested that language be added to require consideration of the nature of services provided by the component unit.

The Board tentatively agreed to amend the note disclosure requirements to require a discussion of the criteria for including each component unit in the financial reporting entity.

The Board also tentatively agreed to require that minority interests in organizations with joint venture characteristics be reported as “restricted net assets, nonexpendable” in proprietary funds and in the government-wide statement of net assets of the primary government.

The Board considered the fiduciary responsibility notion in paragraph 19 and decided that the topic should not be addressed in this project. The topic was added to the GASB potential projects list.

At the January 2010 meeting, the Board tentatively agreed that the proposed effective date should be periods beginning after June 15, 2012. The Board also continued discussing its previous decision that acquisitions of 100 percent of the net assets (for example, stock) of a corporation would be reported as blended component units. The Board tentatively decided that there should be no distinction made between certain percentages of ownership. Once it is determined that a purchase of a majority interest results in a component unit (based on the intent of the purchase being enhancement of the government’s ability to provide services), the component unit would be blended or discretely presented based on the current blending criteria. To report the purchase of “explicit, measurable” equity interests, the Board tentatively decided that an asset should be recorded by the primary government if the component unit is discretely presented. The explicit, measurable equity interest notion would be the same as that currently used for reporting interests in joint ventures.

The Board next discussed its previous decision to expand the blending requirement in paragraph 53 to include component units that issue debt that is primarily secured by revenues of the primary government. The Board tentatively decided that the term primarily will be replaced with entirely or almost entirely. The term secured will be replaced with expected to be repaid. In addition, the paragraph will explain that leases should be included in the definition of debt for the purpose of applying this criterion.

Finally, the Board discussed whether its previous decision to blend lotteries also should be applied to casinos. After further deliberations, the Board tentatively decided that there should not be a specific proposed provision in Statement 14 to require blending of lotteries or casinos. Therefore, the guidance provided in the Comprehensive Implementation Guide, which is that lotteries should be discretely presented, will be retained.

At the January 2010 teleconference, the Board tentatively decided to use the same reporting approach for equity interests in component units as that in paragraphs 72–74 for equity interests in joint ventures. The Board also tentatively approved draft changes to paragraph 55 to incorporate this guidance.

At the February 2010 meeting, the Board reviewed the preballot draft of the Exposure Draft and made certain changes to clarify the provisions in the draft document.

At the March 2010 teleconference, the Board unanimously approved for issuance the Exposure Draft, The Financial Reporting Entity, an amendment of GASB Statements No. 14 and No. 34. The comment deadline was June 30, 2010 and a public hearing was scheduled for August 3, 2010.

Statement 14 Reexamination—Minues for Deliberations

Minutes of Teleconference, November 17, 2010

The Board reviewed a ballot draft of Statement No. 61, The Financial Reporting Entity: Omnibus. The Board, after making minor clarifying changes, voted unanimously to issue the final Statement.

Minutes of Meeting, October 25, 26, and 28, 2010

The Board reviewed a preballot draft of the proposed Statement, The Financial Reporting Entity, an amendment of GASB Statements 14 and 34, recommending minor clarifying changes. A ballot draft of the final Statement will be reviewed at the November 2010 teleconference.

Minutes of Meeting, September 14-16, 2010

The Board continued redeliberations on the provisions in the Exposure Draft, The Financial Reporting Entity, an amendment of GASB Statements 14 and 34, considering the responses received as part of the Board’s due process.

The Board first discussed comments regarding the criteria for inclusion. To address respondent comments regarding the difference in wording between paragraphs 21a and 21b of Statement 14, the Board tentatively decided to amend paragraph 21b, changing may be to is. To further clarify this change, the Board also tentatively agreed to add a footnote to paragraphs 21a, 21b, and 27 referring to the concept of dual inclusion in paragraph 38.

The Board next discussed comments on inclusion of component units under the misleading to exclude concept. The staff proposed language to clarify the nature of the amendments to paragraph 41. The Board requested that the staff clarify the proposed language. In addition, the Board tentatively decided to provide a clearer explanation regarding the use of professional judgment in paragraph 34 of the Basis for Conclusions.

The Board then discussed the criteria for blending, tentatively agreeing that the current blending principle is appropriate. The Board also tentatively agreed that the current criteria for blending under the substantively the same board concept is sufficient. In addition, the Board tentatively decided to replace the term control in footnote 7 and to address the outsourcing of management activities in the Comprehensive Implementation Guide rather than in the Standards section or the Basis for Conclusions of the Statement.

The Board also tentatively agreed that the new blending criterion concerning component units that issue debt to be repaid by pledges of primary government resources is appropriate, with a minor amendment that would remove irrevocable from the phrase “continuing irrevocable pledge and appropriation.” Additionally, the Board tentatively determined that requirements for blending under the provisions of services are sufficient and that lotteries and similar activities should be addressed in the Comprehensive Implementation Guide.

Lastly, the Board discussed comments on reporting funds of a blended component unit. The Board tentatively agreed to further amend paragraph 54 to state that, if a component unit is blended, the funds of the component unit are subject to the same financial reporting requirements “and reporting alternatives” as the primary government’s own funds, including those regarding major fund reporting. Regarding the Exposure Draft’s proposals for reporting blended component units in a single column business-type activity, the Board tentatively agreed that the combining information should be referred to as “condensed combining” financial information and also encompass the statement of cash flows.

Minutes of Meeting, August 3-5, 2010

The Board commenced redeliberations on the provisions in the Exposure Draft, The Financial Reporting Entity, an amendment of GASB Statements 14 and 34. The Board discussed financial accountability as the overall approach to the Statement and determined that the notion of financial accountability should continue to serve as the basis for defining the financial reporting entity.

The Board also discussed comments on note disclosures and tentatively decided to amend the requirements to clarify that component units may be disclosed together if they have common characteristics as long as each component unit is separately identified.

The Board next discussed the proposed effective date for implementation. Based on respondent comments and the results of the field test, the Board continues to believe that the proposed effective date (periods beginning after June 15, 2012) is appropriate and should be carried forward, subject to the outcome of future redeliberations.

The Board also discussed the flowchart format and tentatively agreed that the format adequately conveyed the major requirements of Statement 14, as amended, subject to the outcome of future redeliberations.

Lastly, the Board reviewed the field test results noting those findings did not raise any significant issues that would result in modifications to the Board’s proposals.

Minutes of Teleconference, March 9, 2010

The Board reviewed and provided comments on a ballot draft of the proposed Exposure Draft, The Financial Reporting Entity. The Board members suggested changes to further clarify the draft material. After discussion, the Board voted unanimously to issue the Exposure Draft.

Minutes of Meeting, February 16-18, 2010

The Board reviewed the preballot draft of the Exposure Draft and made certain changes to clarify the provisions in the draft document. A ballot draft will be considered at the March teleconference.

Minutes of Teleconference, January 26, 2010

The Board continued its discussion of reporting of equity interests in component units from the January meeting. The Board tentatively decided to use the same reporting approach for equity interests in component units as that in paragraphs 72 74 for equity interests in joint ventures. The Board also tentatively approved draft changes to paragraph 55 to incorporate this guidance.

Minutes of Meeting, January 5-7, 2010

The Board reviewed a draft of the standards section of the Exposure Draft and suggested changes to further clarify the proposed Statement. Based on anticipated issuance of the final Statement in February 2011, the Board tentatively agreed that the proposed effective date be approximately one year later (periods beginning after June 15, 2012).

The Board continued discussing its previous decision that acquisitions of 100 percent of the net assets (for example, stock) of a corporation would be reported as blended component units. The issue in question was how to report ownership of 51 to 99 percent of the net assets of a corporation in the primary government’s financial statements. The Board tentatively decided that there should be no distinction made between certain percentages of ownership. Once it is determined that a purchase of a majority interest results in a component unit (based on the intent of the purchase being enhancement of the government’s ability to provide services), the component unit would be blended or discretely presented based on the current blending criteria. To report the purchase of “explicit, measurable” equity interests, the Board tentatively decided that an asset should be recorded by the primary government if the component unit is discretely presented. The explicit, measurable equity interest notion would be the same as that currently used for reporting interests in joint ventures. The Board requested that the staff further examine how the explicit, measurable provision is currently being applied. The results of this research will be discussed by the Board at the January 2010 teleconference.

The Board next discussed its previous decision to expand the blending requirement in paragraph 53 to include component units that issue debt that is primarily secured by revenues of the primary government. The Board tentatively decided to modify certain wording in the proposed requirement. Consistent with the blending criteria in paragraph 53b, the term primarily will be replaced with entirely or almost entirely. The term secured will be replaced with expected to be repaid. In addition, the paragraph will explain that leases should be included in the definition of debt for the purpose of applying this criterion.

Finally, the Board discussed whether its previous decision to blend lotteries also should be applied to casinos. After further deliberations, the Board tentatively decided that there should not be a specific proposed provision in Statement 14 to require blending of lotteries or casinos. Therefore, the guidance provided in the Comprehensive Implementation Guide, which is that lotteries should be discretely presented, will be retained.

Minutes of Meeting, November 18-20, 2009

The Board discussed reporting requirements for major component units and tentatively decided to remove the current provision to consider the component unit’s significance relative to the other component units. In addition, new language would require that consideration be given to the nature of significant transactions with the primary government and to the significant benefit/burden relationship that exists between the component unit and the primary government. In addition, the Board requested that language be added to require consideration of the nature of services provided by the component unit.

The Board tentatively agreed to amend the note disclosure requirements in paragraph 61 to require a discussion of the criteria for including each component unit in the financial reporting entity.

The Board also tentatively agreed to require that minority interests in organizations with joint venture characteristics be reported as “restricted net assets, nonexpendable” in proprietary funds and in the government-wide statement of net assets of the primary government. This will result in the amendment of paragraph 35 of Statement No. 34, Basic Financial Statements—and Management’s Discussion and Analysis—for State and Local Governments, to specifically state that the nonexpendable category may be applied to minority interests in organizations with joint venture characteristics.

The Board commenced discussion of the fiduciary responsibility notion in paragraph 19. Following a discussion of staff research on how governments are reporting fiduciary activities, the Board concluded that the issues associated with this topic were broader than reporting entity consideration and, therefore, should not be addressed in this project. The topic will be added to the GASB’s potential projects list.

Minutes of Meeting, October 6-8, 2009

The Board continued its discussions of the misleading-to-exclude criterion for reporting component units. The Board tentatively agreed to the proposed clarifying language presented. However, the Board requested that the “or incomplete” from the “misleading or incomplete” criterion be eliminated from the proposal.

The Board tentatively agreed to language clarifying that funds of blended component units are subject to the same requirements and constraints as funds of the primary government.

The Board tentatively agreed that the acquisition of 100 percent of the net assets (for example, stock) of a corporation would be reported as a blended component unit.

Minutes of Meeting, August 26-28, 2009

At the previous meeting, the Board tentatively decided to amend the criteria for blending so that, in addition to having substantively the same board, a component unit would have to have a financial benefit/burden relationship with the primary government in order to qualify for blending; otherwise, it would be discretely presented. At the current meeting, the Board considered the potential consequences of limiting blending to only that situation and tentatively decided to expand that notion to require blending when management (below the level of the elected officials) of a primary government has operational responsibility for the activities of a component unit. The addition of this new blending criterion will be highlighted as an issue in the Exposure Draft resulting from the project.

The Board also requested that the blending provisions of Statement 14 be amended to clarify that blended component units are subject to the same requirements and constraints as funds of the primary government (except for the general fund).

The Board next continued its previous discussions of the misleading-to-exclude criterion for reporting component units. The Board reaffirmed its tentative decision to retain the criterion but requested that the staff continue working on changes to the language to clarify that it is subject to professional judgment. The Exposure Draft will include an issue asking whether the criterion is still needed.

Minutes of Meeting, July 14-16, 2009

The Board continued its discussion of the criteria for reporting blended units and tentatively decided to propose the following amendments:

Tentative change to the substantively-the-same board criterion—In addition to having substantively the same board, a component unit would have to have a financial benefit/burden relationship with the primary government in order to qualify for blending. Otherwise, it would be discretely presented. In addition, the Board requested that the staff explore an addition to this criterion that would be an alternative to the benefit/burden relationship (that is, benefit/burden or this criterion) for blending. The criterion discussed would be based on management reporting relationships with primary government’s management (not including elected officials) that would be similar to that found with a primary government’s own departments or agencies.

New criterion—A new criterion would be added to propose blending of a component unit if its principal activities are financed with debt that is secured primarily by revenues of the primary government. This criterion often would require blending of entities created to issue debt, even if the proceeds of the debt are provided to parties other than the primary government. This criterion would not encompass guarantees of the component unit’s debt.

Clarification of almost-exclusively-serves/benefits-primary-government criterion—Clarification would be added to paragraph 53b to indicate that lotteries would qualify for blending if the lottery net proceeds benefit almost exclusively the primary government.

Blending in stand-alone business-type activity reports—Language would be added to paragraph 54 to clarify that blending of business-type activity component units, such as a university hospital, in a single column stand-alone business-type activity report, such as a university report, is done by combining all information into the primary government column. However, combining information would be required to be presented in the notes to the financial statements of the primary government.

Finally, the Board requested the staff to further explore the mechanics of blending component units as funds of a government. Specifically, the Board will discuss whether it is appropriate to allow blending of component units to be accomplished by combining them with existing funds of the primary government (excluding the general fund) for reporting as if the combined funds were a single fund or whether component units should be reported separately as funds of the primary government (for example, a major fund).

Minutes of Meeting, April 21-23, 2009

The Board revisited its discussion on the component unit inclusion criteria. It reviewed four options for amending the criteria, one of which was to leave the criteria as it is currently written in Statement 14. After discussing each option and analyzing how each would affect different example component units, the Board tentatively decided that an amendment should be made to the inclusion criteria so that potential component units that meet the fiscal dependency criterion in Statement 14 also would be required to meet the financial benefit/burden criterion to be included as a component unit of a reporting entity. The other criteria for inclusion currently in Statement 14 would be retained. The Board also discussed possibilities for a new term for the fiscal dependency definition because this term has caused some confusion in the past. The Board tentatively decided that, because the term is also important to the definition of a primary government, it would not change the term. The Board did, however, discuss the possibility of providing a specific term that describes entities that meet both the fiscal dependency and financial benefit/burden criterion. The addition of this term and what the specific term could be will be discussed at a future meeting.

The Board also revisited its discussion of the “misleading to exclude” criterion. The Board tentatively decided that the “misleading to exclude” notion will be retained in Statement 14; however, this notion will be expanded to clarify its intent. The current wording of the “misleading to exclude” notion could be viewed as being generally prescriptive, although it was more intended in most cases to be permissive. To clarify this, the Board will consider, at a future meeting, possible changes to paragraphs 12, 20, 30, 40, and 41 of Statement 14.

Minutes of Teleconference, March 31, 2009

The Board reaffirmed the notion that blending of component units is appropriate only when they are in substance the same as the primary government. The Board also tentatively agreed that the specific criteria for blending should be amended to provide more consistent presentations of certain component units. The Board agreed to examine specific proposed changes, including changes that may affect the presentation of state lotteries, at a future meeting.

Minutes of Meeting, March 10-12, 2009

This topic was deferred to the March 31 teleconference.

Minutes of Meeting, February 17, 2009

The Board began a discussion of the “fiscal dependency” criterion outlined in paragraph 21 of Statement 14. The intention of the discussion was to determine if this provision continues to be appropriate and if there are possible modifications that need to be made to it. The Board did not reach any tentative conclusions and requested that the staff further consider the criterion as part of a broader discussion of the definition of financial accountability in paragraph 21 at the April meeting.

Minutes of Meeting, January 27-29, 2009

The Board continued its discussion of the potential direction it would like the reporting units portion of this project to take. During the deliberation of issues regarding fund and department reporting, some Board members expressed their belief that reports that fell within this category generally were special purpose in nature, and that it was not their intent for the GASB to set GAAP for special purpose reporting. The Board decided that the project should not provide guidance for these or other reporting unit financial reports; therefore, the reporting unit presentations part of the project was removed from the current technical agenda. The Board also began a discussion of the “misleading to exclude” criterion outlined in paragraph 12(c) of Statement 14. The intention of the discussion is to determine if this provision continues to be appropriate and if there are possible modifications that need to be made to it. The Board did not come to any conclusions and will discuss the matter further at the March meeting.

Minutes of Meeting, December 16–18, 2008

The Board tentatively decided it would deliberate the following issues during the Statement 14 Reexamination:

The appointment of a voting majority criterion when it results in component units being blended and there is little to no financial relationship between the entities

Whether the fiscal dependency criterion is appropriately positioned in the standard

Whether the misleading-to-exclude criterion is still needed now that Statement 39 has been issued

How to address some governments’ inadequate discussions of component units in the notes

Whether the provisions for determining major component units are appropriate

How investments in component units should be displayed in the financial statements

Clarification of how to report minority interest investments in component units

Clarification of fiduciary responsibilities and fiduciary activities.

Minutes of Meeting, November 4–6, 2008

The Board continued discussing potential financial reporting standards for funds, departments, and other reporting units that are not reporting entities, as defined in Statement No. 14, The Financial Reporting Entity. At the previous meeting, the Board tentatively decided to limit the reporting units portion of the project to only those reporting unit reports that purport to follow GAAP, which, by definition, are limited to general purpose external financial reporting. At this meeting, the Board considered the degree to which information in reporting unit financial reports could meet the qualitative characteristics of information in general purpose external financial reports. The Board tentatively concluded that the information either meets, or can be made to meet, the qualitative characteristics. In the case of special information that may be presented in a reporting unit financial report, the placement of the information in the report (for example, in supplementary information rather than in the financial statements) may affect the ability of the reporting unit financial report to meet the qualitative characteristics. Accordingly, this project may lead to guidance on the placement of such information.

The Board next considered what should constitute the minimum required presentations for a general purpose reporting unit financial report. The Board tentatively decided to use the current AICPA guidance for department reporting and fund reporting, and to use Statement 14 for primary government reporting as a starting point for further deliberations. Future deliberations will consider which particular presentations would be relevant.

Minutes of Meeting, September 24–26, 2008

The Board commenced deliberations on the agenda project covering both a reexamination of the requirements of Statement No. 14, The Financial Reporting Entity, and consideration of reporting requirements for fund, department, and similar financial reports.

The Board tentatively agreed to generally follow the current Statement 14 framework during the reexamination. This framework includes (a) the criteria for inclusion of component units and (b) the methods of presenting component units. The Board also acknowledged that the agreement to continue with the criteria does not eliminate the possibility that amendments could be proposed.

Statement 14 Reexamination—Major Tentative Decisions to Date

Statement No. 61, The Financial Reporting Entity: Omnibus, was approved in December 2010.